Gold Focused on Speeches; Powell and Bostic to Set the Tone

XAU/USD tested the 1,385 level earlier in the session on Monday, but it wasn’t able to break down that level and the unit returned to trade at current levels around 1,395, 0.14% negative on the day.
Mauricio Carrillo
Gold Focused on Speeches; Powell and Bostic to Set the Tone
Gold Focused on Speeches; Powell and Bostic to Set the Tone

Gold is extending its decline for the fourth straight day as investors are considering a not-that-dovish Fed regarding a fully priced in a rate cut in the next FOMC meeting.

Fed chairman Jerome Powell will talk in front of the House Financial Services Committee on Wednesday. Market is focused on what he will say regarding monetary policy. Plus, how dovish will he be regarding the US economy performance.

Earlier in the month, traders priced 100% in the possibility of a rate cut on the FOMC meeting in July. However, the latest jobs report published on Friday raised questions about the necessity of a rate cut and the willingness of the Federal Reserve to make it.

In this framework, the greenback is one of the major beneficiaries as it declined on the back of a possible aggressive rate cut. But now it is raising for the fourth consecutive day as market is not sure about what the Fed will do.

DXY is now trading 0.16% positive on Tuesday as the greenback is moving at 97.53. Previously, it jumped to 97.60, its highest level since June 19.

Gold ready to move

XAUUSD daily chart July 9

Back to the metal, XAU/USD tested the 1,385 level earlier in the session on Monday, but it wasn’t able to break down that level and the unit returned to trade at current levels around 1,395, 0.14% negative on the day.

Saxo Bank analyst Ole Hansen highlighted in a note to clients that the metal is holding above the 1,380 critical support. Gold “is clearly erring on the side of caution. We have the dollar having moved higher and with that, gold is struggling a bit.”

Regarding Fed’s interest rates, FX Empire analyst James Hyerczyk highlights the role of Atlanta Federal Reserve President Raphael Bostic as he is hawkish who doesn’t believe a rate cut is needed.

“Bostic didn’t see the need for a rate cut in late May, nor did he vote for one in June. Furthermore, he seems to be siding with Powell as both indicate policymakers will “act as appropriate to sustain the recovery,” Hyerczyk said.

The analyst considers that a dovish Bostic would be a surprise for traders and then his change os vision would send Treasury yields and Dollar down, pushing gold higher.

China raises gold reserves

The People’s Bank of China said Monday China had raised reserve of gold for a seventh straight month, adding 10.3 tons in June, following the increasing of 74 tons in the previous six months.

According to experts, China is buying gold increase holdings in slower economic growth performance. Also, as a countermeasure amid a possible prolonged trade war.

Poland has more than doubled gold assets in the last months. Russia is another buyer for gold.

Metals report for July 9, 2019

Silver is trading positive for the second day on Tuesday, but the metal remains near to lows just above the 15.00 area. Currently, it is adding 0.23% gains as it is moving at 15.05.

Copper is falling for the fourth day in a row as the mineral accelerated losses on Tuesday to break below the 2.6350 level and trade as low as 2.6195. Now, XCU/USD is trading at 2.6290, 0.95% down on the day.

Palladium is extending its decline from the 1,575 area on Tuesday as the XPD/USD broke below the 1,550 level to trade as low as 1,540. It is now moving at 1,555, 0.55% negative on the day.

Platinum is falling again on Tuesday after performing a bounce cat day on Monday. Today, XPT/USD is trading at 807.95, 1.10% down on the day. Technical conditions remain negative with the 800.00 on sight.

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